Asia base oils - week of Oct 2: Demand outlook

·        Asia’s base oils demand likely to stay mixed, with weak demand in China, steady demand in southeast Asia and firm demand in India.

·        China’s major lubricant blenders raise finished-lube prices from late-Sep through to mid-Oct 2023.

·        Move incentivized end-users to bring forward procurement plans ahead of week-long public holiday in China at start of October.

·        Any such move could have left blenders with more depleted stocks ahead of public holiday.

·        Any such move could trigger brief rise in demand after the public holiday as blenders maintain preference to maintain lower stocks and procure on need-to basis.

·        Domestic blenders’ cautious procurement compounds impact of rising domestic base oils supply.

·        Combination of weak demand and rising supply adds to blenders’ reluctance to build larger stocks and complicates sellers’ ability to implement or maintain higher prices.

·        China’s August base oils demand falls to eight-month low.

·        Weaker demand curbs refiners’ leverage to raise prices that face growing pressure from rising feedstock and diesel prices.

·        Demand weakness shows signs of extending into Q4 2023 even with seasonal pick-up in consumption.

·        Trend incentivizes refiners to extend shutdowns or cut run-rates.

·        Trend incentivizes overseas refiners to target other markets instead.

·        China’s August base oils exports rise to one-year high, even with low domestic base oils production.

·        Persistent surplus volumes for export highlight weakness of China’s domestic demand.

·        China’s September exports show signs of falling ahead of seasonal pick-up in demand at end-Q3 2023.

·        Singapore’s August base oils exports to southeast Asia outpace shipments to China and India combined for a fourth month.

·        Exports had rarely exceeded flows to China and India before 2022.

·        Trend highlights growing demand in southeast Asia and Singapore’s leveraging on that growth.

·        Trend reduces Singapore’s exposure to weaker Chinese demand and to the prospect of rise in domestic supply in India.

·        Vietnam’s August base oils imports hold firmer, rise year-on-year for third time in four months.

·        Improving import volumes add to signs of firmer lube demand in southeast Asian markets like Vietnam, after slowdown earlier in year.

·        Firmer demand boosts attraction of targeting southeast Asia with more base oils supplies.

·        Thailand’s lower August base oils exports, drop in shipments to China and Singapore, and rise in shipments to Mideast Gulf, points to more mixed demand in Asia-Pacific region.

·        India’s base oils demand for overseas supplies likely to hold firm on tighter domestic supplies, seasonal pick-up in consumption.

·        India’s base oils prices lag surge in US export prices, ICIS data shows.

·       Trend suggests supply in Asia and Mideast Gulf is sufficient to meet demand.

·        India’s very-light-grade base oil price discount to domestic retail prices narrows sharply.

·        Trend could curb interest in importing additional supplies of very-light grade base oils.